Buying property in an online auction guide

Buying property in an online auction guide

Matthew Tooth, LendInvest

Auctions are an excellent way to quickly snap up a property, whether you’re investing in a buy-to-let property, looking for a renovation project or purchasing your own home. What’s more, the number of homes on offer through property auctions is on the rise - in the first six months of 2016 16,228 property lots were on offer, up from 15,409 over the same period last year, according to auction portal Essential Information Group.

But auctions are not just limited to physical auction houses. There are now a number of online auction sites, such as LOT11.co.uk and auctionhouse.co.uk, offering you the chance to snap up a property with just a few clicks of your mouse or even via your mobile device.

So how does the process work?

Get registered

If you want to bid on a property in an online auction, you will need to register with the auction site. The process varies between different sites; some will only look for your address and contact details, while others will want to see photographic ID and a reliance letter signed by your solicitor.

You may also need to pay a refundable registration fee.

Depending on the site, this process can take some time so be sure to do it in advance of the auction itself.

The property details

Around two to three weeks before an online auction is held, the details of the various lots will be published on the auction site.

This will generally detail things like the length of the lease, floor plans, legal details and the guide price.

With LOT11, you also benefit from seeing exactly which properties LendInvest is in principle happy to lend against.


What sorts of properties appear on auction sites?

Vendors marketing properties via auction sites are often looking for a quick sale at a fair price. This will include properties for sale from corporates (including banks and building societies), private vendors including probate sales, properties that are in the hands of an official receiver and properties owned by local authorities or housing associations.

Many properties which appear on auctions will be in need of some work, making them ideal for property investors looking to make a profit from a renovation project.

Some of these properties will require such extensive work - for example, they do not have a working kitchen or a bathroom - that you would not be able to arrange a traditional mortgage on them.

Arrange a viewing

It’s definitely a good idea to go and look around the property before the day of the auction. Viewing details will vary depending on the property - some will hold open days on specific dates, while others will offer individual appointments.

You can generally arrange viewings directly with the auctioneers or their joint agents.

Look out for addendums

There will occasionally be changes to the property information between when it is first published and the day of the auction.

These amended details may be published in the form of an announcement on the lot page of the auction site, while others will release a separate ‘addendum’ sheet.

For example, the guide price may have been reduced or the property may have been sold prior to the auction.

Get your finance in place

When you buy a property at an auction, you will generally have to pay a deposit of around 10% of the purchase price within 24 hours of the auction concluding and you will usually need to complete the purchase within 28 working days. As a result it is essential to work out how you are going to pay for it well in advance.

Organising a traditional mortgage may not be available on the property and will invariably take too long, which is why bridging loans are a popular choice for auction buyers who cannot fund a purchase in cash. Bridging loans are a short-term form of property finance, typically lasting for several months or up to a year. The selling point is that bridging finance lenders will generally be able to provide the funds for the purchase within a matter of days. This is a huge benefit, compared with the weeks’ or even months’ long waits you have to allow with many traditional mortgage lenders.

Once you have completed the purchase, you can then take your time to organise a traditional mortgage or buy-to-let mortgage on the property, or fix it up and then sell it on again.

Some lenders, like LendInvest, work with online auction houses to make the process for buyers easier. This means going through the catalogue in advance and making clear which properties we are willing to lend on.

The bidding process

There are a number of different online auction houses, and the way they format their auctions will be slightly different. With LOT11 for example, there is a live bidding process for each individual lot, which may last around 10 to 15 minutes. Others, like John Pye Auctions, run their auctions over a couple of days. Bidding on each lot begins at the same time, and you then have 48 hours in which to place bids. Make sure you familiarise yourself with how each auction site operates in advance.

Online auction houses that operate a live bidding process may allow you to pre-submit your highest offer. Similarly if you cannot bid online on the day you may be able to do so by telephone, though you will need to give the auction house notice.

Bidding costs you nothing more than your time, but you will also likely have to pay a ‘successful bid fee’ to the online auction house if you make the winning bid.

The reserve price

This is the lowest price that the vendor is prepared to accept for their property. If the bidding does not reach this price, then they do not have to sell. The reserve price won’t be published beforehand.

After the auction

If you make a winning bid, you have made a contract to complete the purchase within a matter of weeks. Failure to complete on the deal in the required time frame will mean you will lose your deposit. Hopefully you have the finance in place to complete the deal and you take ownership of your new property.

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Latest Comments

brandonlee10
brandonlee10 24 Jul 2017

The financial ramifications of the triggering of Article 50, the starting gun for Britain's departure from the EU, are far from clear. Buyers will be most cautious in London, given that buying a home in...

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IrisJ.
IrisJ. 19 Jul 2017

Great advice, but may I also add that when buying an already built home, make sure you do all of the proper inspections. Most importantly pest inspection because people tend to get surprised when they

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IrisJ.
IrisJ. 17 Jul 2017

The third point is, in my opinion, the most important one. People have become too inconsiderate and careless when it comes to rented properties. If a landlord wants to protect their property, regular visits...

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cornishalan
cornishalan 10 Jul 2017

Added to the cost of purchasing these village properties are the above average maintenance costs. Particularly where the property is a listed building or requires specialist building skills such as thatching...

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Jo Mullett
Jo Mullett 07 Jul 2017

Here in Swansea, known as the Japanese knotweed capital of the UK, it never fails to amazes me that people have no idea of the potential problems this invasive non-native plant can cause when buying or...

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NathanG
NathanG 05 Jul 2017

McDonalds, for example, have been purchasing their real estate on prime locations for years. If something happens to the company they'll have invaluable assets that will be able to save them. We might

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Jonah
Jonah 04 Jul 2017

Graham: surprised to see you cite the "extra tax liability" as capping out at ?560. It doesn't - the extra tax is exponential, as it is levied on the income (i.e the inflating level of rental income you...

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Dianne Griffen
Dianne Griffen 29 Jun 2017

Be very wary of anyone bringing you deals that they have ?found? and want to ?sell on to you? or ?joint venture? with you on ? you need a proper legal contract for this, involve a RICs surveyor to confirm...

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jason hadzikostas
jason hadzikostas 28 Jun 2017

The most important thing is a budget. Students have to manage their spendings in food, house maintenance, books and many other things. According to me, student Studios are the perfect option for them as...

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SecomTech
SecomTech 22 Jun 2017

AT Last...This was discussed years ago and there was a move towards landlords registering their bad tenants on a database..(can't remember where) It seems a logical step though our leaders will probably...

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Bertrand
Bertrand 02 Jun 2017

How about the Welsh Govt introducing a scheme to protect landlords against "rogue" tenants who are then taken to court for criminal damage to the properties they trash. Pretty unlikely I suspect and politically...

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AmberMorris
AmberMorris 25 May 2017

"Please don't pick a novelty tune-playing doorbell. They're not 'fun'. They're stupid." Laughed a lot to this. It's actually true, though.

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